PM's poll pitch: Labor will minimise choice

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John Howard: "Of course I think I might have done some things differently but you've got to look at the balance sheet of these things."Photo: Penny Bradfield

When you think of Mark Latham, John Howard wants you to remember Gough Whitlam. This is his edited interview with Peter Hartcher.

On the difference with Mark Latham

How would you describe the underlying philosophy behind the parties' campaigns?

Well, I call him Mandatory Mark. He essentially believes that a particular pattern of behaviour should be rewarded. I don't think that is the role of government. I think the role of the government is to facilitate choice.

This is most apparent in relation to his family and tax policy. I mean, how he can justify what he's done in relation to many low-income, single-income families; and I think his education policies are based on class and envy. They're just old-fashioned attempts to whip up hostility towards people that are presumed to be wealthy. And he might have majority approval for his decision, but the intensity of the feeling of people who believe he's engaging in class warfare has been underestimated.

This campaign has shown up quite philosophical differences between the preferred model and the choice model.

The Labor Party rewards the preferred model; we promote choice. The preferred model is certainly not a stay-at-home mother. The preferred model is certainly not total choice in the education of your children. The preferred model in industrial relations is certainly not choice. A lot of their policies minimise a narrow choice whereas our policies expand them.

The inevitable comment of the commentators is that there are no real philosophical differences. There are actually sharp differences on this occasion.

If you're using the words "class warfare" is this another way of saying it's a socialist ...

No, it's very Whitlamesque. I mean, [Latham] is enthralled with his hero. There's no doubt about that. I mean, he's more Whitlam than he is Hawke.

The choice confronting undecided voters

"Do they want to continue with the team and the qualities that have given us this strong economy with low interest rates and low debt and high employment and high real wages?

Or do they want to hand it over to an inexperienced team who will give us high budget deficits and high interest rates and a bad industrial relations policy?

That's really what it's about in the end and that's the message I would direct to undecided voters whether they're farmers or families or whatever.

The leadership

Labor has an ad campaign that says John Howard is ready to leave. If you look at Tony Blair's position - that he will contest the next election but retire before the one after - he doesn't give his opposition any scope for scaremongering. Why don't you kill off the Labor campaign and give some clarity to voters?

Tony Blair will answer to the British public and I'll answer to the Australian public.

There's an easy option for you to give clarity to the voting population.

The Australian voting public know my position, that if they are good enough to re-elect me I'll remain leader as long as my party wants me to.

Do you expect to contest the next election?

That would be entirely a matter for my party.

There are a number of different types of uncertainty that go with the leadership question. There's the when, the who and the how. You've dealt with the first one. In some respects you've got who the next person is going to be. Then there is the manner of any such handover. Are there any assurances?

That assumes there's a handover.

You mean it's possible there won't be?

I know the games you play. But my position is unaltered.

The Reserve Bank is meeting on interest rates. You don't have any power over their decision, and there's a slowing in spending in the economy and other signs of slowing. Do you agree that interest rates are no more likely to rise under Labor than under the Coalition?

I think interest rates are far more likely to rise under a Labor government.

Based on the past rather than the present?

On the past performance and also the future impact of their currently stated industrial relations policy. That's the basis of my claim.

You're not surprised no economist has backed your views?

Many of those economists have made a lot of comments in the past about how interest rates are going to move, and they've often been proved wrong. However, both on the basis of Labor's past performance in office, which is very potent evidence, and also the future impact of their industrial relations policy, I base my claim that interest rates will always be higher under a Labor government than a Liberal government. I've got very compelling track evidence.

I think one of the big factors that people leave out of this is that we've had real wage rises but there's not been an outbreak of inflation. That's because they have been based on productivity, and nobody can take that away from us. Once you take productivity out of wage fixation you run the risk of giving a spurt to inflation.

Look at what the financial market movements on interest rates suggest. Even when the polls have suggested that Labor is ahead, the markets show not a hint of concern about the interest-rate structure looking years ahead. They don't give any credence to your view. Investors putting money on the line think there isn't any real danger of an inflationary wages policy under Labor.

No, but I'm putting forward an objective analysis. Financial markets can often be wrong. I mean, I never sort of bet on the infallibility of financial markets.

Spending like a sailor?

You portray Labor as being an irresponsible economic manager, but so far in this campaign you've promised more net new spending than they have, so how does that make them irresponsible?

That only assumes that you accept the veracity of all of their claimed savings, which we don't. Many of them have either not been submitted or they've been submitted [too] late. I mean, why didn't they put the entirety of their tax and family policy in three weeks ago?

Can I just go back once again to invite people to look at what has happened. I mean, our commitments are eminently deliverable within the framework of the larger surplus, about 0.25 per cent each year of gross domestic product. We still have spending as a portion of GDP falling during the [four years] of the forward estimate. You generate surpluses. You've paid off debt. You leave enough there to provide an effective buffer. There is this sound economic argument that says that if you have too large a surplus in time of strong growth it can exert a contractionary influence on the economy.

Economists and members of the public alike have an impression that you've become a fiscal profligate where you once had a reputation for being fiscally conservative. Do you have any plan for recovering your reputation?

I don't accept that my reputation has been tarnished because when you look at the scale of commitments that is a false charge. You run an economy well, you build up surpluses, you give taxation relief and family benefits in a budget. You come into an election campaign. If there had been no initiatives at all I would have been accused of sitting on a huge surplus. I would have been accused of being out of touch. I mean, it's a balance you've got to strike.

Iraq

The Weekly Standard, the conservative Washington magazine, says that a lot of eyes will be on Australia for the election, and if the Howard Government should fall it will send a signal to other governments that have troops in Iraq that that policy may be suicidal. Do you think that's the correct conclusion for other countries to draw?

Well, I would firstly hope that the Government doesn't fall. I would, irrespective of what happens to us, I would not want any country that currently has forces in Iraq to pull them out, and I would hope that the Opposition would see the folly of its current policy ... In the past few days I've received a letter from the acting Prime Minister of Iraq asking us to keep our forces in Iraq and saying how important they are to things like longer-term stability and the transition to democracy of the country.

Did he seek any particular reassurances or further commitment?

No.

The next term

What are the three key themes that you would have for your next term?

Well, the first of them would be to immediately tackle the skill shortage that we certainly face. We have a huge skill shortage in this country and unless we can achieve a major shake-up with technical education we're not going to be able to provide the people we need to maintain the productivity base that can be ours over the next little while.

I've talked about the technical education changes with skill shortages. I really do regard that set of policy proposals as being the best of either side in the whole campaign. I've had more head-nods about a trade qualification being as prized as a university degree than I have had about anything else. It is a hugely important thing.

The second key challenge is to make certain that we take advantage of all the trade opportunities we have and that just goes a little bit beyond just negotiating trade agreements.

It also involves implementing our policies in relation to having a fund to encourage fewer or lower greenhouse gas emissions in areas of traditional energy utilisation. One of the great opportunities Australia has is to try and find solutions to the greenhouse gas emissions challenge that's coming out of the use of coal and LNG. It seems to me common sense that you exploit the natural advantage you have.

The smart thing for Australia to do is have a breakthrough in technology in relation to coal and LNG rather than to imagine that in a fairly short period you can see them being replaced by other forms of energy. We have a huge natural advantage and I think what we have to do is go flat out to find solutions to those problems. And the choice is not between renewables and traditional sources of energy.

The choice is between high and low emissions in relation to energy. I would see that as a very important issue. We've committed ourselves already in the energy white paper to $1.5 billion, of which industry were putting in a billion and we're putting in $500 million.

If we can get a real breakthrough there, we'll have it made because we are the largest exporter of coal in the world and we have enormous supplies of natural gas and we've a very reliable supply. ...

The only reservation about it is whether we can do something to reduce the greenhouse gas emissions. I think we've perhaps in the past had a rather ambiguous debate about this and I think we do need to press ahead very strongly with that.

I think we've identified the challenge of the ageing of the population. That is a cultural change as well as a policy change. You have to encourage business and all sorts of people to bring about changes in relation to the attitude. It is something that involves encouraging greater workforce participation by everybody, but particularly by older people because they're already in the workforce and they have an enormous amount to contribute.

On having regrets

Is there anything you'd like to have done differently in your time in office?

Of course I think I might have done some things differently but you've got to look at the balance sheet of these things ... I mean, we have achieved an enormous amount. What troubled me in the early days was I allowed a few things to be debated and kicked around too long before I took a decision. One area is native title. We seemed to debate that interminably. I thought somehow or other you could reach some kind of consensus but in the end that proved impossible. They're things you learn.

We probably didn't adequately explain the swap between the petrol excise and the GST part of the tax reform. We ended up acknowledging that and making some changes. I volunteered two, I'm not going to volunteer any more.

On accountability

Recently we've had the community debate about the quality of advice that governments get from the public service.

Look, it is just this idea that the public service gives you the advice they think we want to hear. That is nonsense. I really emphatically reject that. It is absolute nonsense. It comes out of two issues, the children overboard affair and Iraq.

Gerry Gleeson is also saying it about NSW. There's a broader perception that public servants may not feel as free to speak out. How do you tackle that perception?

Well, it is hard to tackle that perception if people have it, but it is the inevitable function of the rising in influence, properly so in my view, of ministerial advisers. There was a time when the only people in a minister's office were departmental people and that was the culture. That is different now.

We don't sort of treat the public service in our department in any way improperly and, you know, we work very closely with them. It's a hard thing to counteract, I agree, because people have that perception. But there's a balance point.

The public service does not own policy. I mean we are a democracy. In the end I am accountable. If things go wrong, I get the blame. The public servants continue. There's a certain mandarin arrogance in this proposition that their view is necessarily right. It's not. They don't have to explain something to the public. They don't have to strike the balance between what is politically achievable and what in pure policy terms is desirable. That's my job.

I'm very happy with the quality of - I mean, can I say, I'm very happy with the quality of the top people in the bureaucracy.

On education

Are you comfortable with the way the [funding] formula is now working?

Well, I don't think it's a perfect formula but I don't think any formula is. It's better than the old formula and the reality is that the so-called elite schools get about a fifth - from the Commonwealth Government - about a fifth of what it costs to educate a child at a government school. I think that's reasonable. I think any parent who takes a $10,000 a year load off the taxpayer by sending their kid to a private school, independent school, whatever you want to call them, is entitled to something and I think a fifth is about right.

On the health system

How does Australia come up with a better health system?

Ours is better than any other - for all its faults it really is.

God help us if we had the American health system, it is really bad. I am no fan of the American health system nor am I a fan of the British National Health system because it produces poorer quality.

I'm not saying it's perfect but I think it is a very good health system and I think it's quite a well balanced one; it's got a public component and a private one.

On asylum seekers

Are you disappointed that there are still 56 children in detention?

Look, I would like to see all children out of detention but not at the price of weakening the policy and sending the wrong signal to prospective future illegal immigrants.

There are still 16 kids on Nauru and 11 on Christmas Island.

Yes. Well, that is not easily solved because of the complexity of the return arrangements. There's only one child of a boat person in detention on the mainland. But the overwhelming message that comes out of all of that is that our policy worked. The boats have stopped coming. The Pacific solution has been very successful despite what people think.

Are you expecting any solution to the remaining children any time soon?

We're working it and we'd like to, yes. We don't enjoy having children in detention. Nobody does. But we enjoy even less the policy that allowed for Australia as an open target. This couldn't have gone on.

On industrial relations

We'll continue pushing the boundaries of industrial relations change. An important thing on the industrial relations agenda is to make sure we don't let it slip and that of course won't happen if we get elected.

Some of the forecasts for productivity indicate we are going to enter a tough period.

Well, I think the productivity challenge is very big, that's why the skills thing - that's why skills are so important and that's why a free labour market is so important. I mean if we bring back the award system, we'll really sort of knock the stuffing out of the productivity growth.

That's been the key achievement of the last few years. We were languishing quite badly and we've clawed our way back. We're still a long way behind on productivity.

Our productivity is not as great as that of the US, nowhere near it. We set that as a goal. But that's very much the labour market. If you don't have a free labour market you can't achieve a lot.

The states

From your frustration it's clear over the past year there is starting to be a debate on federalism. Are you up for the big discussion on it?

I think the country has changed. I think the mood of the country, Australians now are nationalists and localists, they are less New South - well they'll never be New South Welsh - but they see themselves more and more as Australians and they want solutions that suit Australia and they want solutions that suit their local community. I mean that's just a mood thing, I'm not proposing any constitutional revolution, I'm making an observation.

In a good climate the best thing to do is, you know, if you have completely co-operative approaches, that's good but I - it's just a mood change.

I picked this up on talkback radio. Talkback radio makes you instantly accessible and the natural thing is people will raise something with you and I'll say "Well that's a matter for the states", "No, but you're the Prime Minister". I'm always the last person to answer that.

See the point I'm making is that I don't think the states are doing their job.

I mean they've got all of this GST revenue now, and the answer of the federal Labor Party is to give them more, instead of saying "Why don't you do your job?" Now, okay, it might win him a few headlines in a federal election campaign but it's a long-term bad policy to reward inadequate funding with more funding from the Federal Government on top of the GST. I think it's bad policy.

If we had starved the states of money they would have a legitimate case, of course they would, but we haven't. We've given them the GST. That was the whole idea of the GST or one of the ideas, part of the grand design.

The real failure has been that of the states to spend more of their burgeoning GST revenues on government schools and hospitals.

You said a co-operative approach of the states is the best one to have.

That's the ideal, yes.

But you've also shown in the last few weeks that there are alternatives if they're not prepared to ...

Yes. I'm prepared to bypass the states in the national interest, as any prime minister should be.

Relaxed and comfortable no more?

Before the 1996 election you talked about the ideal of a relaxed and comfortable Australia, but now you've talked about wanting a secure Australia. Does this tell us about how you've changed, or how the country has changed, or how the world has changed?

Well, I think it does tell us a lot about how the world has changed, yes. It was in a context that I made the "relaxed and comfortable" comment; it was about our history and our standing in the world. But it does tell us about how the world has changed.

We are living in a more challenging world because of international terrorism. And the strength of the Australian economy is such that I don't believe that people should lightly risk it, because it is very strong.

And it's hard to argue that the Labor Party will do a better job.

The Herald has also offered Mr Latham the opportunity of a final campaign interview.